Milwaukee City and County budgets calm this year, but…

Budget briefs released this fall by the nonpartisan, independent Wisconsin Policy Forum found that while the City of Milwaukee and Milwaukee County adopted their 2019 budgets with relatively little controversy, clouds remain on the horizon for Wisconsin’s two largest local governments.

In a new report, WPF researchers examine major areas of financial stress for the City of Milwaukee and Milwaukee County and compare them with the state’s other largest municipalities. The latest issue of The Wisconsin Taxpayer, “Juggling Priorities,” concludes that although other large city and county governments in Wisconsin face similar fiscal challenges, those facing the city and county of Milwaukee “are of a higher magnitude.”

The report notes the city faces future budget pressures over public safety demands, with police costs consuming just under half of its projected general fund revenue increase in 2019. Infrastructure needs are another major concern: although the mayor’s proposed budget exceeded its in-house limit for borrowing for capital projects, $44 million in requested projects still went unfunded.

For the county, WPF researchers note that the comptroller estimates a $12.8 million annual structural deficit in future years because of an ongoing imbalance between needed spending and local revenue growth. Long-term challenges include addressing delayed infrastructure needs, most notably construction of a $300 million public safety building, and balancing discretionary spending (such as transit, parks, and recreation) against state-mandated services.

The report found that among Wisconsin’s 10 most populous cities, both police and debt costs tend to dominate local budgets. In 2016, Milwaukee ranked highest for per person police spending ($511), followed by Racine ($403), with Oshkosh spending the least ($195). Racine (31.3%) outpaced both Oshkosh (30%) and Milwaukee (24%) for the share of general fund spending dedicated to debt service; the report notes that Oshkosh has plans to reduce its debt load within the next decade.

Among the state’s 10 most populous counties, WPF researchers found that only Brown County spends a larger portion of its operating and capital budget on parks and cultural programming than Milwaukee County (14% versus 12%). The report found no other counties spend more than 8% of their budget on these programs. Similarly, only Kenosha County has higher per capita debt service spending than Milwaukee County ($710 versus $620), followed by Brown ($472) and Dane ($422).

What most separates Milwaukee County and the City of Milwaukee from their peers, however, is their employer pension contributions. The city and county each have their own pension systems; all other state and local government employees participate in the Wisconsin Retirement System (WRS).

In the city’s case, in 2017, “if Milwaukee had a required contribution similar to Madison’s at 10% of covered payroll, then the city would have realized $12.4 million in savings to put toward other operations or capital projects,” WPR researchers conclude.

Similarly, the report notes, “the other most populous counties in the state – all of which are part of the WRS – contributed between 7 and 9% of their covered payroll amount to pensions in 2017,” compared to Milwaukee County’s 27%. The county would have saved $44 million if its contributions were similar to Racine County’s contributions of 9.3% of payroll.

The report concludes that efforts to address both specific spending pressures in Milwaukee—including consideration of whether the city and county should maintain distinct pension systems—would appear to be merited, as would consideration of different revenue approaches “to address the extraordinary challenges facing Wisconsin’s largest city and county.”

A copy of The Wisconsin Taxpayer, “Juggling Priorities,” can be downloaded here.